Use the following to answer question 4: Table: Lilly\'s Apple Orchard Quantity o

Question

Use the following to answer question 4: Table: Lilly's Apple Orchard Quantity of Apples (bushels) 0 s0 40 70 80 130 190 260 340 430 4. (Table: Lilly's Apple Orchard) Look at the table Lilly's Apple Orchard. Lilly is price-taking owner of an apple orchard; her variable costs are given in the t Her orchard has fixed costs of $30. If the price of a bushel of apples is $80 many bushels will Lilly produce? Is this a long-run equilibrium? If not, what the price of a bushel of apples in the long run? Show your work

Explanation / Answer

Lilly will produce 7 bushels. Because at this quantity, the Profit maximizing condition,i.e., MR = MC is satisfied.

No, this is not a long run equilibrium. Because, Fixed cost is involved. In the long run, there is no fixed cost.

In the long run, price is equal to Average Total Cost.

Q FC VC TC = FC+VC MC TR = $80*Q MR 0 30 0 30 0 1 30 40 70 40 80 80 2 30 70 100 30 160 80 3 30 80 110 10 240 80 4 30 130 160 50 320 80 5 30 190 220 60 400 80 6 30 260 290 70 480 80 7 30 340 370 80 560 80 8 30 430 460 90 640 80

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